REUTERS/Jose Manuel Ribeiro
A man walks in front of a window of the headquarters of Portuguese bank Banco Espirito Santo in Lisbon July 21, 2010.
On Thursday, the bank reported a €3.6 billion loss and the bank was ordered by Portugal's central bank to raised capital.
Shares of the bank, which has made headlines over the last few months over concerns regarding its capital position, have lost nearly all of their value.
Bloomberg's Joao Lima and Henrique Almeida wrapped up Banco Espirito Santo's earnings report and the Bank of Portugal's requirements.
Lima and Almeida wrote:
"The Bank of Portugal required the lender to raise the money after it set aside 4.25 billion euros in the first half, mostly to cover souring loans to other members of the Espirito Santo Group. That cut Banco Espirito Santo's common equity Tier 1 ratio to 5 percent, less than the 7 percent regulatory minimum, according to a statement yesterday. The central bank is also probing the lender's former managers and suspended executives in charge of audit, compliance and risk management."
You can read the Bank of Portugal's statement here.
On Friday, Simon Nixon writing in The Wall Street Journal outlined a number of problems currently facing Banco Espirito Santo and the broader financial landscape in the Eurozone.
Among the issues addressed by Nixon were whether or not the government will use public money in helping Banco Espirito Santo raise the capital required of it by the Bank of Portugal.
Nixon notes that the Portuguese government has the money it would conceivably need to come to Banco Espirito Santo's aid, but says the larger risk for Portugal could be reputational.
"Indeed, the bigger risk for Portugal may be reputational: Lisbon has won plaudits for its efforts to free up product and labor markets, but this scandal risks reinforcing concerns that the country continues to be held back by a culture of cronyism. The Bank of Portugal has acted robustly to suspend key executives, block the former controlling family's voting rights and appoint external auditors. But it is essential that the BES board, the Bank of Portugal and the Portuguese government make good on their promises to transparently investigate the scandal and ensure any wrong-doing is swiftly exposed and punished."
Nixon added, however, that the contagion risks posed by Banco Espirito Santo are less serious than the sluggish economic news that has come out of France and Italy recently.
On Friday, following a sharp sell-off in the U.S. market on Thursday, equities in Europe sold off, notably the German DAX, which lost more than 2% and Spanish markets which fell 1.8%.
Stocks in Portugal lost nearly 3%.
U.S. stocks were falling again on Friday as investors digest a flood of economic data, the fallout from the Argentina bailout, as well as the implications for Europe following Banco Espirito Santo's troubles.